The reasons cited in favor of MNP were classified into advantages to subscribers and regulators. The former were benefited by an increase in choice (of packages) and the eliminated costs of having to inform third parties of a number change, while the latter saw MNP as an approach to attract new investment and generate healthy competition. Operators on the other hand, were split in their views; new entrants and operators with smaller market share were of the view that it would create fair play in the industry, but larger operators with significant market power were, unsurprisingly, against the implementation of MNP.

High implementation costs were the main reasons against number portability. Mr. John Horrocks, an MNP consultant who spoke at the Workshop, demonstrated that a basic costs-benefit analysis of the portability process showed that implementing this service in smaller countries with populations of less than 10 million was not a feasible option, as the costs outweighed the benefits significantly. Instead, he suggested a few alternatives for these countries that would make number changes easier for subscribers (e.g.: operators send free SMS to all contacts on SIM, low cost for maintaining old number in parallel, etc), and ensure quality of service and competition among operators.

Figure 1: MNP implementations by country

Source: Presentation slides, MNP Workshop, August 2007

Mr. Horrocks also talked about the results of MNP implementations and lessons learnt in the countries listed in Figure 1. The success of MNP implementation is measured by the percentage of ported numbers, and it is evident that in countries with higher mobile phone penetration, competition and awareness, porting rates are high (e.g. Hong Kong and Australia). It was interesting to note though, that in some cases where MNP was implemented successfully, it proved to be an economic failure (e.g. Ireland, Finland, Malta, etc), while the implementations in UK and Netherlands were failures in all respects.

These varied results can be attributed to a number of reasons. Hong Kong’s MNP implementation, built on an already implemented solution set in place for fixed-line services, was driven heavily by the regulator; in addition, a highly competitive market structure in a technologically-aware community, and the fact that the introduction coincided with the entry of four new operators into the market, ensured portability a success there. The Australian regulator persistently promoted number portability to the public, while maintaining porting times of less than 3 hours on average, which eventually led to the successful implementation of MNP.

On the other hand, in the Irish case where MNP implementation was a success, the lack of competition (two incumbents and one weak new entrant) proved porting to be an economic failure. The same happened in Finland, where implementation was a success, but due to the absence of minimum contract periods and the provision of high incentives to port (from one operator to another), operators started losing heavily. This resulted in the introduction of minimum contract periods which, in turn, reduced the porting rate from 40% to 10% leading to economic failure. In the UK, Oftel (regulator at the time) pushed for MNP hoping it would increase competition, but did not play a hands-on role in the implementation phase. Additionally, only one operator in the UK was in favor of portability, and these factors collectively played a large role in the resulting failure.

A number of lessons can be learnt from these situations. Mr. Horrocks explained that it was essential for both regulators and operators to be in favor of and have heavy involvement throughout the porting process. The success of MNP depended greatly on competition and awareness and therefore it was the duty of both regulator and operator to keep subscribers informed of all things related to porting. He also said that it was important for regulators to understand that MNP did not create competition, but only improved it. Furthermore, for number porting to be successful it was necessary for a clear goal to be established, with a good set of rules (technical and legal) laid down from the start of the MNP process. He also stressed that porting time (i.e. time taken to port a number from operator A to operator B) had to be minimal, ideally one day at most, to ensure a successful MNP implementation.

The Workshop also covered the technicalities involved in number porting. Various features such as the number portability database configurations (centralized, distributed and hybrid), the call/SMS routing schemes (direct and indirect), and payment mechanisms were presented over the course of three days. The use of ENUM and NGN systems to make the porting process simpler were also discussed.

In light of these technical developments, call forwarding as a low-cost solution to number portability was not seen as the most efficient way to deploy MNP, although it was implemented in Singapore. Over 10 years ago, when the Telecommunication Authority of Singapore (TAS) discussed MNP as a means to lower number switching costs for subscribers and increase competition among operators, they explored three alternatives: 1. call forwarding, 2. originating re-route, and 3. Intelligent Network (IN) solutions. While Option 2 deviated from the GSM standard and affected services such as international roaming, Option 3 was not technologically mature yet, and therefore they settled for Option 1. They did not, however, rule out the possibility of implementing Option 3 at a later date. (Read more about MNP in Singapore)

The technical specifications employed in the number portability process in Pakistan were also described in detail. Similarly, the regulatory framework (including operator rights and obligations, charging schemes, best practices, and policy implications) required for the successful implementation of MNP was communicated by members of the PTA who were engaged in the Pakistani MNP process.

The key lesson learnt from the Workshop was that there was no standard MNP solution for a country. Every solution was unique with success riding on a number of factors.

The Nation Economist, Sunday 26 August 2007 | See Print version

I have to say that JHU does not know economics. What is the rationale behind taxing the only sector that is growing? The industry is giving government enormous amount of revenue. Twenty percent of every mobile rupee goes to the government. If you squeeze the goose for more eggs the goose will ultimately die. To my knowledge some of the taxes the government is thinking of will really kill the industry. We have got data which say people in the bottom of the pyramid are willing to spend Rs.500 per month on communication. So if the government put another tax these people will be discouraged to get themselves connected and as a result of that the government will lose revenue.

By Indika Sakalasooriya
The entry of the Indian business tycoon Sunil Miththal’s Bharti Airtel, India’s biggest mobile operator into the Sri Lankan market has left many players in the telecom sector to ponder on the harsh effects of severe competition in the future.

The existing mobile operators in the market seem to have appraised the impact even before the physical arrival of the Indian giant. The majority of the industry analysts are now of the view that the profit margins of the mobile operators will become thin due to the expected intense competition in the market.

However, amidst all these developments, from the government’s side we heard a story of further taxation of the growing mobile industry. The Nation Economist thought it opportune to get some insights from Professor Rohan Samarajeewa, a former head of the Telecommunications Regulatory Commission of Sri Lanka who is a keen observer of developments in the telecommunication sector in the Asian region to find out his assessment of the Sri Lankan mobile industry and where it is heading.

Here are the excerpts of the interview
Q : What is your general assessment of the Sri Lankan telecom sector as it stands today?
A : Doing well and could do much better. Why do I say doing well is compared with every other sector, the telecom sector is doing well. Its contribution to the GNP growth rates is considerable. Why do I say it can do better is Pakistan has overtaken us in mobile and our ADSL data situation is not really satisfactory in terms of people getting value for money. A lot of the BPO industry is not growing as fast as we expected. So in that sense we really could do much better than we are doing now.

Q : What kind of an impact will the arrival of Bharti Airtel have on SL telecom industry and to the mobile operators in the market?
A : Well, first we have to look at the Indian market and Bharti Airtel. India is one of the exciting markets in the world because every month 7 million new phones are added to the market. That means 7 million new subscribers. So now you get a sense of how big the Indian market is. And also India belongs to BRIC (Brazil, Russia, India and China). BRIC has the most happening markets in the world and we are sitting next to a BRIC. In the Indian telecom industry Sunil Miththal and Bharti are seen as innovators. He is getting awards and prizes in India. We have to find out for what he is getting prizes?

They are not getting those for being the biggest or for being profitable. We have to understand that there is no technological innovation but business innovation when Bharti is considered. The business innovation is how you make high profits on very low revenues per user. The company has pioneered very innovative techniques and that is they don’t run their networks. They outsource the whole thing down to the supplier. So what they are doing is basically brand managing. They own the brand and manage the interface with the government and they supervise the outsourcing process. Having the two facts in mind let us think of the size of Sri Lanka. Sri Lanka is about the size of greater Mumbai or greater Delhi. So, here we have is a company extremely good at managing costs and handling numbers. So here they come to Sri Lanka. I’ll be very concerned if I’m one of their competitors.

However there are two things that go against them. One is Sri Lanka has a few very efficient and sharp mobile companies and among them nobody is a sleeper. The second reason is Bharti is investing two little. It suggests to me that they are basically going to do a very conservative roll out. In 2004 the Central Bank of Sri Lanka in the Consumer Finance Service said 25% Sri Lankan households except in Mannar, Kilinochchi and Mulathiwe areas had some kind of phone. Now I’m willing to stick my neck and say it has gone up to 55% by now and that’s an extrapolation from some data we have. So we have to understand that this is a highly saturated market. At the same time we don’t have mobile number portability. The only country that has mobile number portability is Pakistan. So considering all these facts I’d say it is not easy for Bharti.

Q : Will the competition be healthy in terms of survival of the industry?
A : Yes sure. I’m always there for intense competition. Many think that the margins of the service providers will go down with the entrance of a new player. But I don’t think so. In 1994 when Dialog enter the market many people thought Sri Lanka was a tiny little market and there was no way that a fourth mobile operator can succeed. First it was said that Dialog would not succeed and secondly the margins will come down. But what happened? A fourth player came. Did the margins come down? Let us assume that what you are saying is correct. So the worst thing that can happen is the exiting of one player. The player who cannot give the enough commitment will exit the market. What is wrong in that?

Q: With the arrival of Bharti it was reported that some parties in the government had proposed to further tax the mobile industry as the sector is considered to be profitable. What is your reading on that?
A : I have to say that JHU does not know economics. What is the rationale behind taxing the only sector that is growing? The industry is giving government enormous amount of revenue. Twenty percent of every mobile rupee goes to the government. If you squeeze the goose for more eggs the goose will ultimately die. To my knowledge some of the taxes the government is thinking of will really kill the industry. We have got data which say people in the bottom of the pyramid are willing to spend Rs.500 per month on communication. So if the government put another tax these people will be discouraged to get themselves connected and as a result of that the government will lose revenue.

Q: Since you mentioned the issue of number portability, what are the pros and cons of number portability? Will the implementation of number portability lead to some perfect competition?
A : Competition has to be the basic rule we should be working on. An essential quality of competition is when a customer is not satisfied he or she should be free to go to another supplier. So now the question is if I’m not satisfied by my present mobile services provider I still have to bare it since I’m not ready to change my mobile number. But in a place where you have total competition you should be free to go to another service provider while keeping the same number. That is what mobile number portability is all about. People might ask me if the number portability is so important why didn’t you push for it when you were the DG of TRC? I had to deal with less than million phones and we had various problems such as interconnection. So during that time the idea of having number portability is very close to a dream. By now our telecom industry is growing and today mobile number portability has become a very important aspect of the industry.
There are two ways of doing number portability. One is call forwarding and the other way is to do it in a straight way through an intelligent network. It has costs and will take time. But it will definitely improve the market.

Q: As a former TRC DG and present advisor to the government of Bangladesh on telecom related matters, what are the reforms you are suggesting for the present telecom regulatory regime for the betterment of the industry?
A: I am a policy and regulation guy. For the industry to grow what we really need is a greater attention to be paid to what we call wholesale access. All the mobile operators should get the privilege to use the under sea cable going out from Mt. Lavinia on a non discriminatory cost oriented way. At the moment there are only three companies using the cable, SLT, GSNL and Dialog. But these other two companies get step motherly treatment from the SLT and that should be straightened. That’s a regulator’s job. Within the country majority of the fiber optic cables belong to SLT. But they should offer that facility to other companies at reasonable prices. Because it doesn’t make any sense in our country for every company to have their own fiber optic cables or to build microwave networks on top of already existing networks. So at a fundamental level I would put that as the highest priority because that can reduce the cost of a call. The other thing as I mentioned earlier is the mobile number portability.

Q : What are the key areas that the existing and the prospective telecom service providers should concentrate in carrying out operations?
A : The bottom of the pyramid is the place they should focus. I’m telling this because we have done research on the matter. The companies should understand that it is where the money is. As Professor Prahalag said, there is a fortune to be made at the bottom of the pyramid. The other fact is in Sri Lanka the main two growing sectors are telecom and banking. Why can’t we put the industries together since that is where the action is.

Q : Some say that the present regulatory system is in favour of the SLT of which the government still has the major stake. What is your opinion on this?
A : The Act we at the moment have is archaic and obsolete. The law is not very good and the staff is not very competent and it is possible that the regulatory authority is not doing well. What I can say is in my time Sri Lanka Telecom was fined for violating its licence condition. Therefore at least I can say during my period SLT was not favoured.

Q : As a person who is running a research body that overlooks the entire Asian region, can you explain why India still does not practise 3G operations?
A : Well the reason is the problem we also have. But India has it in a bigger way. Indian military is occupying a lot of frequencies. Therefore to start 3G operations the Indian Army and the other defence forces should be moved away to clear the frequency. We are not in bad shape as in India but we are close to it. We have not only military problems but also there are other parties who are using these frequencies for low value purposes.